Canada’s productivity lag could be helped by getting AI in to small business

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Canadian business has a productivity problem. It also has a technophobia problem.

The two are related. Get over the latter – especially as it relates to artificial intelligence – and we could open a path to resolving the former.

“There’s been a lot of focus on the safety, the guardrails required around AI – totally legitimate, needed conversations. There has been a lot less attention, though, on the positive impacts or the productivity links that AI can bring,” Catherine Fortin LeFaivre, vice-president of strategic policy and global partnerships at the Canadian Chamber of Commerce, said in an interview last week.

For a more productive economy, she said, “That’s something that could be a low-hanging fruit.”

Ms. Fortin LeFaivre recently wrote a commentary in the Toronto Star in which she tied Canada’s weak productivity performance – Canada is 29th out of 38 countries in the Organization for Economic Co-operation and Development, based on GDP per hour worked – to the low rates of new-technology adoption in our private sector. With AI fast emerging as the next big wave in business technology, there’s evidence that Canada is already falling behind.

Statistics Canada data show that, as of the end of 2021, fewer than 4 per cent of Canadian businesses had adopted any form of AI. A recent report from the Dais, a policy think tank out of Toronto Metropolitan University, says that out of 35 OECD countries whose national statistical agencies have conducted similar business surveys, Canada ranks 20th in AI adoption.

Despite all the buzz around AI in the past year or so, most Canadian businesses are in no hurry to jump on board. The Canadian Chamber of Commerce’s Business Data Lab surveyed companies about their technology plans in the first quarter of this year, and found that just 6 per cent planned to adopt AI in the next 12 months.

In larger businesses – those with more than 100 employees – the lure of AI looks greater, with 16 per cent saying they plan to adopt some new AI within the year. AI adoption looks to be a much bigger problem for small companies of 5 to 19 employees, among which 5.5 per cent planned to adopt AI.

The thing is, 98 per cent of Canada’s businesses have fewer than 100 employees, and these companies are responsible for nearly 40 per cent of the country’s gross domestic product. The Dais report argues that if Canada is to see meaningful productivity gains from AI, it will need to win over this huge swath of smaller businesses.

“For Canada to fully take advantage of the potential benefits of artificial intelligence, we will need to make sure that diffusion of the technology goes beyond the leading adopters, and reaches into the wider market,” the report says.

“While Canada has been relatively effective at getting large firms on board with AI technologies, small firms have been left behind.”

This is what makes the small-business sector the low-hanging fruit, as Ms. Fortin LeFaivre called it, for unlocking significant economic gains from AI. There’s enormous room here to put AI to work making Canadian business output more innovative and efficient.

And, frankly, smaller businesses should have some of the biggest motivation to embrace AI technology. These are operations with a limited number of hands trying to take care of a wide range of tasks, including mundane, time-consuming administrative duties that tie up valuable time and labour. Small businesses have particularly felt the squeeze of skills shortages in the current ultra-tight job market. If relatively simple and narrow applications of AI could take some of those administrative burdens off small-business operators’ hands, it would free up their labour for more valuable and productive tasks.

“Imagine if every professional had an extra hour every day. Maybe that’s what we’re needing,” Ms. Fortin LeFaivre said.

The Dais report also notes that some of Canada’s largest industries have been some of the slowest adopters of AI. The real estate sector, the single biggest contributor to Canadian GDP, is near the bottom of the list. Similarly, some of the largest sectors in terms of employment, such as retail and health care, are among the country’s lowest AI adopters.

“Canada has yet to adopt any industry-based strategies that would benefit one sector over another. The result of this is that adoption has not been concentrated in areas that have the biggest economic impact,” the report says.

For small businesses, whether they are in these sectors or others, one key barrier may be the lack of technology know-how within their businesses to begin with. For companies that are too small to have an IT manager or department, let alone an IT strategy, the concept of AI is intimidating.

Perhaps, then, one key to unlocking the potential of AI in small business, Ms. Fortin LeFaivre suggested, is to think smaller. That goes both for companies looking at AI adoption, and for the national conversation surrounding these new technologies.

“We think of these big, life-changing impacts, but there are a lot of mundane AI uses, and we’re not really talking about that. Like streamlining invoicing, like predictive maintenance,” she said.

“Nobody wants say they’re thinking small. We like to think that we’re thinking big. But sometimes we need to start with the more basic things.”